Channel Marketing

Explore the Strategy of Channel Marketing

The potential to reduce costs, improve efficiency, expand markets and increase customer satisfaction often make business partmenships too productive to pass up. It has become increasingly difficult for businesses to sell one product in one place, necessitating more global cooperation to increase success rates. (See also Alliance Marketing)

In business, a “channel” is the pathway through which goods flow from producers to consumers. It is important to consider every point on the path in order to create a full picture of how goods are actually made and sold.

Take breakfast cereal for example. The channel begins on a field of wheat where the most basic ingredient in cereal is produced. The grain then travels to a grain dispensary, then to the cereal factory, through a grocery distributor and finally it ends up on the shelves at the store. Once the cereal ends up in a bowl on someone's kitchen table the channel is complete. The channel encompasses every point in the life of that box of breakfast cereal.

Channel marketing involves finding new partners to help transfer goods from producers to consumers. Very few producers actually sell the goods they produce themselve, which are instead sold through an intermediary. Consider the cereal once again. There is no cereal store; producers rely on grocery stores to sell their products.

Levels of Channel Marketing

Some companies produce and sell all of their own products through their own internal channels. Others utilize multiple external channels to get goods to consumers. Below is an illustration of how this process works:

0 Level - Manufacturer > Consumer

1 Level - Manufacturer > Retailer > Consumer

2 Level - Manufacturer > Wholesaler > Retailer > Consumer

3 Level - Manufacturer > Wholesaler > Jobber > Retailer > Consumer

Finding new channels and maximizing the potential of those channels is the main goal of channel marketing. It is primarily a business to business (B2B) marketing strategy, involving businesses marketing themselves to other businesses rather than individual consumers. For example, an account executive at company A will try to convince a manager at company B that they would benefit if they started selling Company A's products. (See also B2B Marketing)

The marketing channel that a company chooses affects many aspects of the way a product is sold. A product's price point will depend largely on the type of environment it is sold in. Training and advertising efforts will have to be tailored to meet the needs of the seller. Ultimately, the entire perception of a product will be influenced by the way channel partners present it.

Who Employs Channel Marketing?

Channel marketing is primarily a strategy employed by large firms that offer many products across a wide sales territory. The benefits of channel marketing are best realized in economies of scale where the burdens of production, distribution and retailing are sometimes significant. However, there are exceptions to the rule. Even small producers are always looking for new outlets to sell their products. Think of a jewelry maker with an opportunity to sell on a TV shopping channel. Their sales potential is now much greater than it would be selling just in boutique jewelry stores.

Typically, larger marketing departments are better equipped to handle the demands of channel marketing. Creating and maintaining relationships with channel partners takes a lot of time, negotiation, and evaluation. The more resources a marketing department has to dedicate to a relationship with a channel partner, the more smoothly it will run.

The best channel marketing relationships happen between complimentary partners. Software developers will work better with electronics retailers than they would with shoe stores. But the partners do not need to be identical. A producer might develop a relationship with a retailer that is much larger than it or vice versa. Similarly, companies which seem unrelated can form successful channel partnerships. A toy company might work out an agreement to sell their product in sports stadiums. The only hard and fast requirement is that both partners find value in the relationship. (See also Relationship Marketing)

Value Added By Channel Partners

Channel partners offer value to each other in a number of ways. Here are just a few:

Accounting services

Advertising planning assistance

Catalog services

Data processing programs and systems

Dealer shows and events

Employee training

Financing

Inventory control systems

Store planning and layout

How is a Channel Marketing Plan Developed and Implemented?

The first step in creating a channel marketing plan is to identify potential channel partners. This involves a careful analysis of the product sold, the products of competitors, and the markets where they apply. The analysis must be thorough, technical, and compare hard market data to find the right partner (See also Analytical Marketing).

Once a partner has been identified, they must be convinced that a channel partnership would benefit both parties. Producers must market their products to the needs of retailers in the same way that a company tries to make a pitch to consumers.

After an agreement is reached, both parties will draft and sign a binding contract. It is important that every contingency is accounted for. The only way for a channel partnership to work is for all of the most pertinent details to be agreed upon in a contract before the partnership begins.

With the contract in place, the two parties can begin exchanging goods and services. For the duration of the contract it will be necessary for managers from both sides to smooth out issues and address concerns as they arise. Even the most thorough contracts cannot address every possible issue, so both parties must maintain a productive business relationship. At the completion of the contract, the terms can be renegotiated or the partnership can be severed.

Careers in Channel Marketing

Channel Marketing Manager

What do they do?

A channel marketing manager is typically responsible for managing every aspect of channel partnership. They are responsible for finding, securing and maintaining a relationship between a producer and a retailer. In that capacity, they will devise advertising strategies, negotiate contracts, establish standards for the retailer and address concerns as they arise. Their responsibilities are multi-faceted and depend largely on the partnership they are in charge of.

Education/Experience

Salaries of Channel Marketers

Channel Marketing Manager
- $60,000-$120,000

Channel Support Specialist
- $25,000-$60,000

Account Manager
- $40,000-$100,000

Managers will need to have an undergraduate degree in marketing and may also need a graduate degree in a specialized area of marketing. Further education in areas of contract law or business administration will also be helpful.

Channel Support Specialist

What do they do?

The channel support specialist has many of the same duties as a marketing manager, but they work as consultants. Rather than working for a single producer or retailer, they offer their services to any organization looking to support their channel partnerships. The support specialist provides technological and logistical support, planning assistance, and specialized expertise.

Expertise/Experience

It will be beneficial to have a degree in marketing but this is not absolutely necessary. More important are strong analytical skills and the ability to apply findings. Support specialists have exemplary math and organization skills as well as a strong attention to detail. Having experience in the industry they consult for will also be helpful.

Account Manager

What do they do?

Account managers are ubiquitous in marketing departments and they are responsible for many of the most basic tasks involved in marketing efforts. Their responsibilities are not limited to channel marketing, but they will contribute to campaigns focused on channel marketing. They may work on one project or multiple projects. Their duties are primarily administrative.

Education/Experience

Marketing departments will require new account managers to have an undergraduate degree in marketing. Supplemental education or experience in business will also be helpful. Account managers are typically considered an entry level job, so professional experience is usually not necessary.

How Can Marketing School Help You Break Into Channel Marketing?

Marketing students learn how to carry out detailed market research in order to find new channel partners. They train to analyze and synthesize large amounts of technical data to identify opportunities within the market. Channel marketing is less about a flashy pitch and more about carefully identifying new business partners and revenue streams. Making informed decisions based on careful analysis is one of the most important skills learned as part of a marketing degree.

A degree in marketing will also teach channel marketers how to tailor their products and marketing message to the retailer they have chosen to work with. Different partnerships will require different messages. Examining demographic data, performing focus groups and customizing ad copy are all skills that are taught in marketing schools.

8 Ways to Maintain a Channel Relationship

Agreeing to a channel partnership is only the first step in a partnership. Maintaining that relationship and responding to the various and unexpected needs of producers, retailers and consumers will be much more important and labor intensive. Here are a few ways to build healthy, long term channel partnerships:

Respond to problems with a comprehensive support system

Focus on what has been successful

Directly engage the sales staff with the product

Create a healthy sense of competition among sales partners

Allow all parties to contribute to planning

Leverage the expertise of top performers

Create open lines of communication between channel partners

Provide comprehensive and ongoing training

Skills and Attributes of a Channel Marketer

Some of the most lucrative channel partnerships in history have come from unexpected combinations of producer and retailer. Being able to think outside of the box is what distinguishes the most successful channel marketers. Think of a large grocery store. They not only sell food, but also sell tools, toys, flowers, balloons, magazines and prescription drugs. The reason they sell so many nonfood products is because channel marketers have determined that grocery stores are effective retail environments for a wide range of products.

Perhaps more importantly, channel marketers must have the knowledge, creativity and flexibility necessary to develop and implement channel partnerships. Professionals must have superior communication and time management skills in order to consistently deliver results.